The fall followed gloomy remarks from two Wall Street firms. Lehman Brothers expressed concerns about high expectations, while Thomas Weisel expressed concerns about the firm's IPO lockup expiring, allowing insiders to cash out their shares.
Cavium's third-quarter revenue came in at $14.2 million, up 54% over the past year. Despite the hefty growth rate, Cavium has kept a lid on spending. The company posted GAAP net income of $1.3 million, or $0.03 per share, for Q3; that compares to a net loss of $100,000 -- breakeven on a per-share basis -- in the year-ago period. Cavium also enjoyed a big jump in gross margin during this time, from 57.8% to 63.2%.
The company's engineers keep building improved products to fend off competitors like Broadcom
All the same, risks remain, including a highly concentrated customer base. Cisco
Another concern is the IPO lockup, which expires Nov. 5. In light of the surge in the stock price so far this year, it seems reasonable that insiders and other key investors will indulge in a fair amount of selling. In short, Foolish investors should expect to see continued volatility in Cavium's shares.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 5,221 out of more than 70,000 total participants in CAPS. The Fool has a disclosure policy.